WASHINGTON, DC: The Internal Revenue Service (IRS) building is on April 15, 2019 in Washington, DC, … [+]
If you filed your 2019 tax return by the July 15 extended deadline, and you owe a refund, you will receive a check from the IRS this week for interest accrued. Nearly 14 million Americans will receive a check for interest payments, with the average payment being $ 18. Here’s what you need to know.
Why you get an interest check
Because COVID-19 is called a “disaster” by the federal government and causes the tax filing deadline to be extended, the IRS is required to pay interest on the refunds owed to individuals. Businesses are not eligible for an interest payment.
Interest is paid at the adjusted quarterly rates. The rate for the second quarter was 5%, while the third quarter dropped to 3%. If the debt amount spreads over the quarters, a mixed interest rate applies. No interest will be added to any refund issued before the original deadline of 15 April.
How to get an interest check
Checks will be sent to taxpayers who meet the July 15 deadline and have received or anticipate a refund in the past three months. The interest payments will in most cases be issued separately from tax compensation.
Taxpayers who have received their immediate refund by direct deposit will deposit their interest payment directly into the same account. About 12 million of these payments will be deposited immediately. Everyone else will receive an email check.
Your interest check will be taxed
All earned interest is taxable income. Taxpayers who receive an interest rate check must report the interest on the 2020 federal income tax they file next year. In January 2021, the IRS will send a Form 1099-INT to taxpayers who receive an interest rate check over $ 10.
For the millions of taxpayers who will receive a check in the coming days, the 1099-INT will be sent in 2021 an additional form you will need for your next tax return.
